- Advanced monthly payments set to start on July 15
- Are you eligible and how much can you expect from the credit?
The Treasury announced on Monday that it will be requiring the IRS, starting in July, to begin rolling out the expanded Child Tax Credit (CTC). Eligible households will receive monthly advance payments of up to 50% of their tax credit starting on July 15 and continuing through December 2021.
In March, under Biden’s new American Rescue Plan, the CTC was expanded to the end of 2021. The maximum credit was also increased from $2,000 per child to $3,000 ($250/month) for children ages 6-17 and $3,600 ($300/month) for children under age 6. All credit amounts will be based on the child’s age at the end of 2021. The IRS will send information at end of the year for reconciling credit amounts in preparation for 2021 tax returns. The Biden administration has advocated for extending the credit to 2025; however, as of now, Congress has not yet expanded the credit past 2021.
The CTC is expected to impact over 39 million families and 65 million children total, reaching nearly 88% of all children in the U.S.
For taxpayers who sent in their returns ahead of the May 17 deadline yesterday, no action is required to receive the credit, other than to wait for July. For those who have not yet filed for 2020, the IRS will be using 2019 returns to calculate credit amounts. The major concern surrounding the CTC—which is purposed to eliminate childhood poverty—remains for those whose incomes are too low to even file tax returns at all. These households are, without a doubt, the ones who most need the relief of the advanced credit. How will the IRS know to distribute, let alone calculate, the funds for such family units?
Expanded credit starts minimizing proportionately for incomes that exceed $75,000 for individuals ($150,000 for married households) and begins phasing out for incomes over $200,000 for individuals ($400,000 for married households).
Do you know if you qualify? If so, how much credit can you expect to receive? Call our tax experts at DSJCPA for assistance and don’t forget to visit our website to stay up to date on all new tax code changes.